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California Says Climate Change Law Won't Hurt Economy

Date:25-Mar-10Country: USAuthor: Peter Henderson

California's economy will not be damaged by the state's 2006 climate change law and some sectors could thrive, a state agency said in a report on Wednesday that counters fears in the business community that the measure will kill jobs and economic growth.

The report from the state Air Resources Board, the chief regulator of the law, forecast higher energy costs but said these would be offset by greater overall energy efficiency.

The report also concluded that the measure will yield modest job gains statewide, will have a negligible effect on the state's overall economy and could benefit some sectors such as alternative energy businesses.

California's legislature passed and Republican Governor Arnold Schwarzenegger signed a law in 2006 committing the state to developing regulations to reduce greenhouse gas emissions -- blamed for global climate change -- to 1990 levels by 2020.

"These policies can shift the driver of economic growth from polluting energy sources to clean energy and efficient technologies, with little or no economic penalty," the report said.

California often leads the United States in environmental issues. The debate in the most populous U.S. state coincides with one on the national level over whether steps to curb the greenhouse gas emissions will hurt the economy and kill jobs.

Under the law, the state aims to reduce greenhouse gas emissions through a variety of steps such as tighter standards on car fuel efficiency, standards on energy efficiency in buildings, and a "cap and trade" market for pollution credits.

Under cap-and-trade, carbon dioxide and other greenhouse gas emissions would be capped. Companies would need permits for the pollution they send into the atmosphere and those permits could be traded on a regulated market.

FEARS IN THE BUSINESS COMMUNITY

Critics in the business community in California say the state's aggressive plan will cut jobs and drive up energy prices. They forecast tens of thousands of job losses.

The report was issued after a previous analysis by the state released in 2008 was widely criticized as shallow and based on faulty assumptions. The new report, with input from a 16-member panel of outside experts, came up with similar findings as the previous one.

Annual state economy growth will be the same under the climate change law as it would be without it, officials said.

"We made all the changes and found that the results were pretty much the same as they had been the first time around, which is very modest, almost undetectable overall effect on gross state product by 2020 but some modest improvement in areas of job growth and personal income," Air Resources Board Chairwoman Mary Nichols told reporters in a conference call.

"It is a competent report," Stanford University economist Larry Goulder, who was part of the panel that advised the state on the new analysis, said in another call with reporters.

The cost to the economy of the climate change law will be between zero and about 1.5 percent of gross state product in 2020, Goulder said, and that roughly matched some other studies.

Three U.S. senators -- Democrat John Kerry, Republican Senator Lindsey Graham and independent Senator Joseph Lieberman -- are working to resuscitate climate change legislation in the U.S. Senate after the House of Representatives passed its version of the measure last year.